One reads the following in a newspaper: "Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the country." As a result,an economist would predict that the
A) supply of cars in the country will remain the same and the (average)price of cars will fall.
B) supply of cars in the country will fall and the (average)price of cars will rise.
C) supply of cars in the country will rise and the (average)price of cars will fall.
D) demand for cars in the country will fall and the (average)price of cars will rise.
E) demand for cars in the country will rise and the (average)price of cars will rise.

Question

Quizplus · Accepted Answer

When new restrictive quotas are imposed on Japanese cars, it limits the number of cars that can enter the country. This means that the supply of cars in the country will fall, and as a result, the price of cars will rise. This is the basic principle of supply and demand. When supply is limited, prices tend to rise.

One Reads the Following in a Newspaper: "Today the President